Bright Future For Forestry Investment
Emissions trading scheme demand in 2023 and beyond provides an investment opportunity for landowners or land developers, writes Hamish Frizzell.
30 November 2022
FOREST LAND HOT
Unless you’ve been living under a rock, you’ll know that climate action is at the front of every politician’s agenda. NZ’s Emissions Trading Scheme (ETS) allows a business to offset the impact its business practices may have on the environment by a variety of climate-positive actions, one of which is tree planting. In 2023 this will open up an opportunity for rural landowners to reframe their unsuitable and unproductive farmland as an attractive investment in its own right.
The answer is in carbon credits trading. Participants in the ETS can earn credits for planting new forests every year until they are felled, and if the timeframe is over 50 years the land can be classified a “permanent carbon sink”. Regulation changes in 2023 that will allow new species like fast growing radiata pine to come under the scheme are low investment at around $10-$40k/ ha to establish, and will return around $4-$5k per year or 70-75 credits for 16-18 years.
Permanent forests with planting of indigenous species are even more attractive to investors. A 10ha plot of exotic hardwoods established in 2023, would earn around 220 credits per year, or around $14k through to 2050. That’s $392k income for traded carbon credits at the current rates. The NZU price for credits doubled from round $35 in late 2020 to over $80 earlier this year.
Large corporations in NZ looking to offset their emissions through tree planting can rent or purchase land in order to register their credits under the ETS, meeting shareholder and growing public demand for sustainability. With reforms to the Climate Change Forestry Sector Regulations coming into play in 2023, offsetting will be allowed under average accounting for businesses as part of the government’s action plan to integrate climate positive responsibility within every business – making forests or land with planting potential very attractive as an investment.
‘A 10ha plot of exotic hardwoods established in 2023, would earn around 220 credits per year, or around $14k through to 2050’
Whilst the ETS has been around for a long time, the future only looks increasingly bright for forest planting. The One Billion Trees grant programme is currently closed for new applications, but MPI gives money to other local councils to assist with planting so there are incentives to get started. The scheme has already provided provisions for grants and support to plant 1.4 billion trees between now and 2028, but there will likely be increases to this as climate emergency becomes increasingly part of the development landscape for each new government.
DEVELOPERS LOOK LIVELY
If you are an investor or developer looking for opportunities, take a look at areas which have previously included “undesirable” topography for farming or development, which could be subdivided into different titles, including those available to plant. Retaining plantable land and on-selling the good farming land could provide a low-cost entry into the process. Strategic surveyors will be able to help subdivide land into attractive lots for each market, and navigate the complex EMF forms and council planning requirements to register the land and covenants for planting. If you are a rural landowner or budding investor, speak to your surveyor now about the options for your own land or properties currently on the market suitable for forestry investment, and consider other ways that your land can deliver your ROI through planting, emissions trading and clever subdivisions.